Nigerian’s cannot afford more than single digit mortgage – FMBN boss

The Federal Government recently re-appointed Mr. Gimba Yaú Kumo as Managing Director of Federal Mortgage Bank of Nigeria (FMBN) for a second tenure of four years. In this interview from Vanguard news, he assesses the mortgage industry in Nigeria and the plan to recapitalize FMBN for better performance.

Below are excerpts of the interview.

How would you describe the mortgage industry in Nigeria at the moment?

The mortgage industry in Nigeria is just starting if you look at the size of our contribution to the GDP is less than one percent but my target before I leave here is that we should be able to contribute at least 15 percent. That is why we are putting a lot of issues on ground to be able to drive this process.
And how do you do that? If you look at the National Housing Fund (NHF) that we are managing, out of the 170 million population less than one percent are the one contributing so we said this is not good, how do we reach the other segment of the society that are not in formal employment.

Have you resolved the issue of NHF concerning some of the states that pulled out?

As at today, we have only six states that are not in NHF and most of those states, particularly Lagos, what happened is that they have formed co-operative societies on their own. They have registered with us, so they are contributing indirectly to NHF. The other states, we are talking to them and as soon as possible we will see what we can put on the ground. This is because workers want to see actual action; they want to see the mortgages created. This is what we are trying to do in all the 36 states, to be able to build the houses, create the mortgages and at the end of the day we will be able to convince them. But I can assure you that in the next 10 to 11 months all the states will be back.

How many mortgages do you hope to create in the next four years?

It depends on availability of funds, but I hope to create based on the memorandum of understanding with NLC, TUC and NECA, we should be able to do at least four million.

With your re-appointment as MD, how do you intend to improve the fortunes of FMBN?

We will work to continue to provide quality and affordable houses to Nigeria and strive to improve the bank’s balance sheet to modify its standing as a financial institution Our strategy will involve developing pro-active and effective strategies to attract offshore funding for affordable housing to Nigerians as well as improving service delivery to NHF contributors across the country. We also plan to look at improvement of members of staff welfare across board to ensure a well motivated workforce and profitable operations.
The new management will also ensure the completion of ongoing housing estate projects under the Ministerial Pilot Housing Scheme nationwide and the completion of the Goodluck Jonathan Legacy Estate in Kaba District in the Federal Capital Territory, FCT will be vigorously pursued.
As a returning member of the team, I have had the privilege of experiencing the various challenges facing the FMBN as well as the housing sector in general. We have tried to improve on the little we find on ground, people say we did well but we are just starting and we hope within the next few months we will be able to do more so that the results of the efforts will be realized. We have set an agenda for ourselves and chief among them is the recapitalization of the bank. We have made substantial progress on that, in the next few weeks we will see results on the table.

How soon is the recapitalization and how much are we looking at?

Very soon, timing is very essential. There are few issues now. You know we are in politics so government will concentrate more in that area now but we have been promised as soon as possible. What we have requested for is N250 billion. But at the moment there are a lot of competing needs, security, infrastructure but I know that they will do it.

Do you think a single digit mortgage rate can be sustained given available economic indices?

Yes, our rate has always been single digit, our estate development loan or construction loan is 10 percent, our mortgages are at 6 percent and we also intend to extend that same rate to the informal sector so that we can make the houses affordable to them. Nigerians cannot afford any anything above single digit because the average income is very low, that’s why we are providing a buffer whereby they are able to pay.
Like we took the minimum wage of N18, 000 as a base, with that you can be able to do a mortgage of N450 monthly. So this is the minimum the informal sector beneficiaries are expected to pay but this will be difficult for some of them so we are looking at a subsidy.

Is there any way that PMBs can be prevailed upon to charge single digit interest rates?

If you say government, you are talking in terms of agencies that deliver mortgages. On the government side for now it is only FMBN that is really delivering mortgage. And our mortgage is single digit, six percent. We charge our mortgage at the rate of 6 percent on a long tenure basis, 15, 20 and even up to 35 years.

Why is it difficult for developers to give Nigerians affordable houses?

The houses are expensive in the sense that cost of materials for constructing these houses are also high. So, there is need for reduction in the cost of cement, there is need for a reduction in the cost of iron rod and other accessories that will make up the houses. Once that is done, I think it will go a long way in reducing the cost of the houses. These are the issues we are trying to address.
If you look at the earning of Nigerians, particularly somebody who earns N18, 000, which is not up to 100 dollars going by today’s exchange rate, that person is not in a position to buy even a one bedroom apartment going by the present structure. So what we are working together with the ministry to see if we can have discount on some of the inputs that make up the house like discount on cement, discount on rods for construction and also hat we are trying to do on our own is to introduce new building methods that will now reduce the cost of houses.
We just came back from Thailand with officials of FCDA, Ministry of Lands, and Housing and Urban Development. After the Tsunami, they commissioned seven universities to do research on affordable and sustainable housing. We have seen the development in that country. We took sand from Kuje here and they took it to three of the universities. It was discovered that it is even 17 times better than their sand.
So they are producing some blocks for us with less than 5 percent cement content. So if we do that, that issue of affordability will be addressed. Apart from addressing the issue of affordability, we want to address the issue of delivering quality houses. This is because most of the houses, particularly in Abuja, for which some of the mortgages have been created; you will end up paying for a mortgage for 20, 25 years.
How are we sure that these houses will also last up to that time? We want to check that aspect because for us to be able to give you mortgage for a particular tenor, we have to make sure that the house will be able to stand within that period. With the support of Nigerians, these are some of the things we want to do.

Accessibility to land is still an issue, how do you plan to tackle it?

I agree with you, but we have put a MoU in place whereby we are working with various state ministries of land and we are also working with the various labour organizations for the land to either be allocated to us as a government bank or to be allocated to labour directly. Why we are doing that is to reduce the cost because if you allocate it to the developer directly he will put any cost he likes on the property.
And we insist that particular government that is allocating whether it is a state, federal of even a local government that the land should be allocated freely particularly on the houses that we are building for NHF contributors. I am happy to say that as at today in all the six zones where we have pilot projects we are doing on the ministerial pilot scheme all the land that have been given to us is donated free by the various state governments.

This item featured originally on Vanguard news